The graph below shows the market for office rental space. A $400 per month excis

Question

The graph below shows the market for office rental space. A $400 per month excise tax is imposed on firms selling office space. D is the demand curve, S1 is the supply curve in the absence of the tax, and S2 represents the supply curve that includes the tax Who has the larger tax incidence? O Consumers (buyers) Producers (suppliers) S2 S1 $3600 This excise tax falls on the above people because: $3500 O The demand for office rentals is more inelastic than the supply of C0 office rentals For office rentals, both demand and supply are highly price elastic The supply of office rentals is more elastic than the demand for office O rentals $3200 O The supply of office rentals is more inelastic than the demand for office rentals Quantity

Explanation / Answer

ans 1

who has the larger tax incidence

b) producers (suppliers)

ans 2

d)the supply of office rentals is more inelastic than the demand for office rentals

burden falls more on producer if supply elasticity is less than demand elasticity

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